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Angela Merkel's challenger Martin Schulz unveils plan for 'modern Germany'

SPD leader Martin Schulz has called for Germany to use its budget surplus for domestic and EU-wide investment. The pitch is an attempt to revive the SPD's chances against Chancellor Merkel in September's election.

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Schulz presents plan for 'modern Germany'

German Chancellor Angela Merkel's challenger in upcoming elections, Social Democratic leader Martin Schulz, has called for Germany to use its budget surplus on infrastructure investment and strengthening the European Union.

Schulz unveiled a 10-point "Future plan for a modern Germany" on Sunday in a bid to boost the Social Democrats' lackluster performance in the polls against Merkel's Christian Democrats ahead of September 24 national elections.

"Germany can do more," Schulz told SPD delegates in Berlin. "There are those who wait for the future. We want to shape the future."

Under Merkel and Finance Minister Wolfgang Schäuble, Germany has been accused of running up budget and trade surpluses, investing and spending too little at home, and stifling growth across the EU.

Merkel reacts to Schulz' accusations

Merkel meanwhile reacted to Schulz' open appeal to increase public investment, rejecting her challenger's criticism that she was neglecting the country's infrastructure. The chancellor claimed that the main problem was not lack of funds but the long planning process.

"We currently cannot spend the money that we have," she said, highlighting bottleneck situations in planning in the construction industry as well as at the level of regional authorities.

Merkel also said that the federal government had put aside additional money for more investment in its mid-term budget plans, saying: "We still have a lot to do in this regard."

Germany has earmarked billions of euros in investments for schools, nurseries, hospitals and housing, but local authorities have so far spent only a fraction of that windfall due to planning bottlenecks.

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Investment in Germany and EU

Domestically, Schulz urged the state to spend more on faster internet connections, roads and rail, renewable energy and education.  Although there is a legally binding budget ceiling, there is no mandate on how the surplus is spent. 

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"The state - and that is correct - should not allow an unauthorized deficit," Schulz said. "But it must also (…) use its money to improve public infrastructure according to binding directives," he said, adding that there should be a minimum amount allotted for investment.

Schulz, who was president of the European Parliament before taking over the helm of SPD earlier this year, also called for Germany to loosen the purse strings to boost growth and unity across the 28-member bloc.

Germany should invest more in the EU and its institutions because it is good for the country and will garner more solidarity within the bloc on issues Germany cares about, Schulz said.

Read: Angela Merkel presents CDU election manifesto 

He argued for the creation of greater German financial contributions to the bloc's budget, to which it contributes 15 billion euros ($17.2 billion) after paybacks into Germany are calculated.

Financial arm-twisting on refugees

Schulz hinted that he would use Germany's financial clout to push solidarity within the EU, particularly on issues such as taxes, migration, security and defense. 

"Solidarity is not a one-way street. Those who categorically refuse the reception of refugees or engage in tax dumping or ruinous tax competition are lacking in solidarity," he said, threatening fiscal consequences for eastern European states that are balking at taking in refugees and migrants according to an EU redistribution scheme.

He also supported the idea of an EU finance minister.

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Jobs, education and families

Other parts of the 10-point plan, meant to build on the party platform approved in June, address the digitization of the economy.

One proposal is to make government services available online to avoid lengthy bureaucratic waits. Although Merkel has floated the same idea, she has not put a timeline on it, which Schulz set at within five years.

The platform also promises fairer wages, greater job security, free education up to master's degree level, tax cuts for families, financial support for home buyers and maintaining pension levels - all themes that hit on the SPD's social justice message.

The SPD has struggled to capitalize on the so-called "Schulz effect," the name used for a sudden jump in support for the party when Schulz was named as candidate for the chancellery earlier this year.

After running practically neck and neck with the CDU, the SPD has stumbled to almost 20 percent behind Merkel's conservatives. The party, which is the junior coalition partner with the CDU, has often struggled to find major policy platforms and issues that separate it from Merkel, who is viewed by many as a steady and reliable hand after 12 years in office. 

cw/tj (AFP, AP, dpa, Reuters)

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